EFTA Document EFTA01410965

Subject: FW: ***Market Volatility Bulletin: "Brexit" Déjà Vu? FX vs. Equity Vols Diverge Ahead of Election - Credit Suisse Equity Derivatives Strategy*** From: Stewart Oldfield ‹ > Date: Mon, 03 Oct 2016 10:07:57 -0400 To: From: Xu, Mandy [mailto: Sent: Monday, October 03, 2016 9:15 AM To: Xu, Mandy Subject: ***Market Volatility Bulletin: "Brexit" Déjà Vu? FX vs. Equity Vols Diverge Ahead of Election - Credit Suisse Equity Derivatives Strategy*** {Header 1} MARKET COMMENTARY Market Volatility Bulletin "Brexit" Déjà Vu? FX vs. Equity Vols Diverge Ahead of Election Link to Report: Market Volatility Bulletin WHAT STANDS OUT: Similar to what we saw heading into the "Brexit" referendum earlier this year, equity and FX implied vols have diverged as we approach the Nov 8th US presidential election. While USDMXN 2M implied vol has jumped to a 4- year high in reaction to polls showing Trump in a close race with Clinton, equity vols are pricing in very little election risk. See charts below for comparison. For "Brexit", equity vols didn't react until two weeks before the referendum (and even then, it still underpriced the risk of the "leave" vote). Will we see a similar pickup in equity volatility this time as the election date approaches? Historically, we've found October to be the most volatile month of election season and the VIX has gone up an average of 3.5 pts in the month leading up to the election. See pg 14 for tradable election basket ideas. Chart: FX vs. Equity Vols Now vs. Before "Brexit" EFTA01410965 Source: CS Equity Derivatives Strategy MORE INSIDE (Market Volatility Bulletin) Mandy Xu, CFA Equity Derivatives Strategy This material has been prepared by individual traders or sales personnel of Credit Suisse Securities Limited and not by the Credit Suisse research department. 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